Performance management

The philosophy of performance management The philosophy of performance management is based on specific beliefs about how performance should be managed. Inputs, Process and Outputs Performance management emphasizes the importance of inputs process and outputs. Inputs are what employees bring to the job in the shape of knowledge, skills, expertise and competence. Process is how they behave in carrying out their work. Outputs are the results they obtain in terms of achieving objectives and the influence or impact they have on the efforts of their team, their department and the organization as a whole. Performance management analyses outputs and diagnoses the reasons for differential performance by reference to the inputs and behavior of individuals and the circumstances affecting their work. Performance reviews and feedback cover the extent to which results are influences by the individuals motivation, ability, knowledge, skill or attitudes, the way in which they are managed, the resources they are given, and external factors beyond their control. The analysis and diagnosis will be closely linked with specifications of behavioural requirements. These will be focused on the competencies required to achieve the objectives associated with the individuals role, but they will also deal with wider organizational values such as quality, customer service, teamworking and flexibility.

Non-financial rewards through performance management Performance management processes can effectively motivate people through the nonfinancial rewards associated with feedback, reinforcement and the provision of opportunities for growth. Feedback The philosophy of performance management emphasizes the importance of feedback on performance. The feedback will be positive when things have gone well but it will also inform employees whose performance is not up to standard so that they are aware of the need for corrective action. As much feedback as possible is self-generated. People are given the opportunity to plan how they are going to achieve their objectives

and encouraged to monitor their own performance by obtaining feedback data for themselves.

Reinforcement Positive reinforcement is provided by the feedback process when behavior which leads to improved performance is identified. The object is to recognize specific performance improvements as soon as possible after the event. That is why performance management should be regarded as a continuing process. Recognition and therefore reinforcement take place whenever appropriate throughout the year. They are not deferred to an annual performance review session. Similarly, if someone makes a mistake or fails to reach the agreed standard of performance, the matter is discussed immediately and constructively, so that learning can take place and improvement plans can be agreed.

Growth opportunities In focusing on continuous development, performance management can motivate people by proving opportunities for growth. Individuals are encouraged to draw up personal development plans which may be expressed in the form of a learning contract. This spells out what employees should do to develop themselves and defines the support that will be given by their managers and the organization through learning and development programmes. There are a number of significant differences between performance management and traditional appraisal schemes. Performance management in its most developed form: Involves all members of the organization as partners in the process it is not something handed down by bosses to subordinates Is concerned with performance in its broadest sense, embracing not only outputs (results) but also inputs (levels of competence and how competences are used). Is based upon agreements on peoples roles covering accountabilities, expectations (objectives and competence requirements), and development plans, again seen as part of the normal interactive processes which exist between managers and individuals or teams.
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is concerned with team performance as well as individual performance Is a continuous process, not relying on a once-a-year formal review Treats the performance review as a joint affair which is primarily concerned with looking constructively towards the future Focuses on improving performance, developing competence, realizing potential and providing non-financial rewards in the form of feedback, recognition and opportunities to develop skills, competences and careers Concentrates on self-managed learning giving people the encouragement they need to develop themselves with whatever support and guidance they need from their managers and the organization May provide a basis for performance-related pay decisions where such schemes exist, but care is taken over the development of rating systems and the achievement of consistency in ratings May not include ratings at all, especially if the process is used primarily for development and performance improvement purposes Does not rely on elaborate forms or procedures the record of agreements and reviews may be retained by managers and individuals and are sometimes not held by the personnel department Recognizes the need for thorough training in the skills required to agree objectives, provide feedback, review performance, and coach and counsel employees Overall, attaches more importance to the processes of forming agreements, managing performance throughout the year and monitoring and reviewing results than to the content of what is often referred to as a performance management system by implication, a set of mechanisms to get people to do certain things in certain ways.

History of Performance Management Performance Management began around 60 years ago as a source of income justification and was used to determine an employees wage based on performance. Organisations used Performance Management to drive behaviours from the employees to get specific outcomes. In practice this worked well for certain employees who were solely driven by financial rewards. However, where employees were driven by learning and development of their skills, it failed miserably. The gap between justification of pay and the development of skills and knowledge became a huge problem in the use of Performance Management. This became evident in the late 1980s; the realisation that a more comprehensive approach to manage and reward performance was needed. This approach of managing performance was developed in the United Kingdom and the United States much earlier than it was developed in Australia. In recent decades, however, the process of managing people has become more formalised and specialised. Many of the old performance appraisal methods have been absorbed into the concept of Performance Management, which aims to be a more extensive and comprehensive process of management. Some of the developments that have shaped Performance Management in recent years are the differentiation of employees or talent management, management by objectives and constant monitoring and review. Its development was accelerated by the following factors:

The introduction of human resource management as a strategic driver and integrated approach to the management and development of employees; and The understanding that the process of Performance Management is something thats completed by line managers throughout the year it is not a once off annual event coordinated by the personnel department.

If Performance Management is implemented correctly with specific objectives tied to the strategic and operational plan, organisational performance outcomes will likely increase very quickly. For example, if the CEO asked for a 3% increase in gross margin, this objective would be cascaded down to every department, team and individual who can influence the increase in gross margin. Those who are successful at achieving this objective will get a favorable review, those that could not, will get an unfavourable performance evaluation in the absence of extenuating circumstances. The process of Performance Management therefore drives organisational performance outcomes. Employees that achieve the organisational goals are rewarded with favourable reviews and bonuses in line with their performance and contribution to the organisation. Supervisors have conducted performance appraisals for years. Employees have attended training sessions for years. Organization members have worked long, hard hours for centuries. Processes, such as planning, budgeting, sales and billings have been carried out for years in organizations. But all too often, these activities are done
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mostly for the sake of doing them, not for contributing directly to the preferred results of the organization. Performance management reminds us that being busy is not the same as producing results. It reminds us that training, strong commitment and lots of hard work alone are not results. The major contribution of performance management is its focus on achieving results -- useful products and services for customers inside and outside the organization. Performance management redirects our efforts away from busyness toward effectiveness. Recently, organizations have been faced with challenges like never before. Increasing competition from businesses across the world has meant that all businesses must be much more careful about the choice of strategies to remain competitive. Everyone (and everything) in the organization must be doing what they're supposed to be doing to ensure strategies are implemented effectively. This situation has put more focus on effectiveness, that systems and processes in the organization be applied in the right way to the right things: to achieve results. All of the results across the organization must continue to be aligned to achieve the overall results desired by the organization for it to survive and thrive. Only then it could be said that the organization and its various parts are really performing. Armstrong and Baron define performance management as a process which contributes to the effective management of individuals and teams in order to achieve high levels of organisational performance. As such, it establishes shared understanding about what is to be achieved and an approach to leading and developing people which will ensure that it is achieved. They stress that performance management is a strategy which relates to every activity of the organisation set in the context of its human resource policies, culture, style and communications systems. The nature of the strategy depends on the organisational context and can vary from organisation to organisation.'

Performance Management

Performance management cycle

Performance Management processes have come to the fore in recent years as a means of providing a more integrated and continuous approach to the management of performance than was provided by previous more isolated, and often inadequate, merit rating or performance appraisal schemes. Performance management is based on the principle of management by agreement or contract rather than management by command. It emphasizes development and the initiation of self-managed learning plans as well as the integration of individual and corporate objectives. It can, in fact, play a major role in providing for an integrated and coherent range of personnel processes which are mutually supportive and contribute as a whole to improving organizational effectiveness.

Purpose Performance management is a means of getting better results from the organization, teams and individuals by understanding and managing performance within an agreed framework of planned goals, standards and competence requirements. It is a process for establishing shared understanding about what is to be achieved , and an approach to managing and developing people in a way which increases the probability that it will be achieved in the short and long term. It is owned and driven by line management.
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The key words in this definition are: An agreed framework of planned goals, standards and competence requirements the basis of performance management is an agreement between the manager and the individual on expectations in relation to each of these headings. Performance management is largely about managing such expectations. A process performance management is not just a system of forms and procedures. It is about the actions which people take to achieve the day-to-day delivery of results and manage performance improvements in themselves and others. Shared understanding to improve performance, individuals need to have a shared understanding about high levels of performance and competence look like and what they are working towards. An approach to managing and developing people performance management is focused on three things. First, how managers and team leaders work effectively with those around them. Second, how individuals work with their managers and with their teams and third, how individuals can be developed to improve their knowledge, skills and expertise (their attributes) and their levels of competence and performance. Achievement ultimately, performance management is about the achievement of job-related success for individuals so that they can make the best use of their abilities, realize their potential and maximize their contribution of the success of the organization. Owned and driven by line managers performance management is a natural process of management, not a procedure forced onto line managers by top management and the personnel department.

Performance management is concerned with the interrelated processes of work, management, development and reward. It can become a powerful integrating force, ensuring that these processes are linked together properly as a fundamental part of the human resource management approach which should be practiced by every manager in the organization.

Background of performance management The concept of performance management has been one of the most important developments in the sphere of management in recent years. It began to take shape in the later 1980s, growing out of the realization that a more continuous and integrated approach was needed to manage and reward performance. All too often, crudely
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developed and hastily implemented performance-related pay and appraisal systems were not delivering the results that, somewhat naively, people were expecting from them. Performance management has risen like a phoenix from the old-established but somewhat discredited systems of merit rating and management by objectives. Many of the more recent developments in performance appraisal have also been absorbed into the concept of performance management, which aims to be much wider, more comprehensive and more natural process of management.

Principles of performance management Following their in-depths, case-study research into what they termed performance management systems (PMS) on behalf of the Institute of Personnel Management(1992), Fletcher and Williams (1992) came to the conclusion that the real concept of performance management is associated with an approach to creating a shared vision of the purpose and aims of the organization, helping each individual employee understand and recognize their part in contributing to them, and in so doing manage and enhance the performance of both individuals and the organization. They suggested four underlying principles of effective performance management: 1. That it is owned and driven by line management and not by the HR department. 2. That there is an emphasis on shared corporate goals and values. 3. That performance management is not a package solution; it is something that has been developed specifically and individually for the particular organization. 4. That it should apply to all staff, not just part of the managerial group.

The process of performance management Performance management is a continuous and flexible process which involves managers and those whom they manage acting as partners within a framework which sets out how they can best work together to achieve the required results. It focuses on future performance planning and improvement rather than on retrospective performance appraisal. It provides the basis for regular and frequent dialogues between managers and individuals or teams about performance and development needs. Performance management reviews provide the inputs required to create personal or team development plans, and to many people performance management is essentially a developmental process.
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Performance reviews can, however, produce the data in the form of individual ratings which are needed for performance-related pay decisions. To a larger extent, performance management is a process for measuring outputs in the shape of delivered performance compared with expectations expressed as objectives. That is why it focuses on targets, standards and performance measures or indicators. But it is also concerned with inputs and processes the knowledge, skills and behavior required to produce the required results. It is by defining these input requirements and assessing the extent to which the expected levels of performance have been achieved by using skills and competences effectively that developmental needs are identified.

Performance management activities There is a clear link to business plans so that objectives agreed with individuals and teams are integrated with and support the achievement of business objectives. The key activities are: The performance agreement or contract. This defines expectations what the individual or team has to achieve in the form of objectives how performance will be measured and the competences needed to deliver the required results. The performance and development plan. This sets out an agreement on performance and personal development needs, the latter may be expressed as a personal development plan Managing performance throughout the year. This is the continuous process of providing feedback on performance, conducting informal progress reviews and, where necessary, dealing with performance problems. Performance review. This is the formal review of performance over a period covering achievements and problems as the basis for agreeing as necessary revisions to the performance agreement and performance plan. It can also lead to the performance ratings.

The overall goal of performance management is to ensure that the organization and all of its subsystems (processes, departments, teams, employees, etc.) are working together in an optimum fashion to achieve the results desired by the organization. Achieving the overall goal requires several ongoing activities, including identification and prioritization of desired results, establishing means to measure progress toward those results, setting standards for assessing how well results were achieved, tracking
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and measuring progress toward results, exchanging ongoing feedback among those participants working to achieve results, periodically reviewing progress, reinforcing activities that achieve results and intervening to improve progress where needed.

Sources
Armstrong M, Employee reward www.broadllyne.com http://www.peoplestreme.com/what-is-performance-management.shtml

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